Archive for February, 2016

What to know when reporting your fantasy football winnings – or losses

How your fantasy sports activity is classified will affect how your income – or lack thereof – is reported. Specifically, taxpayers need to know whether or not the IRS considers their fantasy football activity to be gambling and whether “the activity is not engaged in for profit (i.e., a hobby activity, if it is not gambling, or casual gambling, if it is gambling) or if the activity rises to the level of being a trade or business.” Read on to learn more.

When you sit down with your CPA to go over last year’s taxable income and they ask you how your fantasy football team did this year, they aren’t just looking to engage you in casual conversation. In fact, how well (or how poorly) you did over the last year might make a difference in the size of your tax bill.

According to the Fantasy Sports Trade Association (FSTA), about 56.8 million people spent their time and money on fantasy sports in 2015 – 73 percent of them were fantasy football players. And, on average, over a 12-month period, players spent about $465 on league-related costs, single-player challenge games and league-related material. In short – fantasy sports has become a serious business and, as with most business matters, you should be prepared to report your fantasy sports winnings (or losses) to the IRS on Form 1040.

Fantasy Money Spends The Same As Real Money

Just because your football team is fantasy doesn’t mean your money is, and when real money is being exchanged, you have an obligation to report it on your tax forms. However, because the IRS has yet to identify proper treatment of fantasy sport income and losses, the jury is still out on the “proper” way to report these fantasy winnings/losses on tax returns. And, from a state perspective, while most departments of taxation are struggling to identify the proper treatment of these funds, a few have issued guidance focused on fantasy sports operators.

Not Just A Hobby?

How your fantasy sports activity is classified will affect how your income – or lack thereof – is reported. Specifically, taxpayers need to know whether or not the IRS considers their fantasy football activity to be gambling and whether “the activity is not engaged in for profit (i.e., a hobby activity, if it is not gambling, or casual gambling, if it is gambling) or if the activity rises to the level of being a trade or business.”

In the article, “How to report clients’ fantasy football winnings,” that appeared in the February edition of the Journal of Accountancy, David Baldwin, CPA/PFS and Donald J. Zidik, CPA, provided some excellent insight into the 4 primary types of activity your fantasy football pastime could be classified as. Below is a brief synopsis.

Ultimately, at this time, how your CPA will classify your fantasy football activity depends on your own facts and circumstances. While you may consider fantasy football to be a hobby, someone else may be using it has a significant source of income.

A hobby activity

For most people, fantasy football would be classified as a hobby – meaning that it does not receive the level of activity required to qualify as a trade or business. In this case, your reporting would be guided by hobby loss rules and reported on line 21 of your IRS Form 1040. Deductions are generally allowed only up to the amount of income you secured as a result of the activity and only if you itemize your deductions. Your expenses, which are reported as miscellaneous itemized deductions, are subject to the 2 percent-of-adjusted-gross-income (AGI) floor and disallowed for alternative minimum tax (AMT) purposes. Your expenses would include your entrance fees for losing contests and other expenses you incurred as a result of the activity.

A nongambling activity – trade or business

Do you keep accurate books and records and conduct your fantasy football activity in a businesslike manner? Then it may qualify as a trade or business. Final judgment, however, is left to the IRS, which will determine if the activity contains elements of personal pleasure or recreation. If you do qualify for this classification though, your ordinary and necessary expenses could be deductible and your net income would be subject to self-employment tax. Your activity will be reported to the IRS on Schedule C.

Casual gambling activity

Would you consider your fantasy football gambling? If so, then you will need to refer to the usual rules governing gambling activities, which means that your entrance fees for losing contests should be reported as gambling losses and allowable only if you itemize your deductions. Different from hobby activity, your losses (to the extent of your winnings) are considered miscellaneous itemized deductions and are not subject to the 2 percent-of-AGI floor and, therefore, are not disallowed for AMT purposes and excess losses cannot be carried over to another year. Your winnings, on the other hand, will need to be reported as income – even if your losses exceed your winnings.

Professional gambling activity – trade or business

If you consider your fantasy football activity to be gambling, and you consider you level of involvement to be “full-time,” and as a means for producing income to sustain a livelihood, you could be considered a professional gambler in the grade or business of gambling. This means that your gambling losses can only be deducted to the extent of your gains and your losses in excess of your gains cannot be carried over to another year. That being said, ordinary and necessary business expenses you incur to engage in the gambling activity are deductible. You will need to report your winnings and losses on Form Schedule C.

The “any’ employer changes impacting small businesses are potentially even more costly than the penalties faced by the “larger” employers. Read on to find out what to expect.

Thinking the provisions outlined in the Affordable Care Act doesn’t apply to your business because you are “under the threshold of 50 employees” is a very dangerous assumption to make.

It’s likely that you’ve heard much ado about the significant changes (and the penalties associated with these changes) large employers – those with more than 50 full-time-employees – are expected to make, but small employers are not immune to the ACA. In fact, the legislation also outlines changes that are mandatory of “any” employer.

The “any” employer changes I have found typically aren’t considered a problem for larger employers because they aren’t likely to have the conditions that result in issues with these specific changes. Companies with fewer than 50 full-time employees, on the other hand, are at great risk.

Why small business owners should be aware of “any” employer changes

It’s typical for small business owners to think they don’t have to worry about the changes that resulted from the ACA. Oftentimes, they will point to their smaller size as justification. The only thing that does is leave them vulnerable to the penalties associated with noncompliance.

The “any’ employer changes impacting small businesses are potentially even more costly than the penalties faced by the “larger” employers. In fact, you could be looking at a max penalty of $36,500 per employee, per year. In contrast, the max penalty on the “large” employer is only $2,000 per full-time employee, per year.

If you own a business with around 30-50 staff members and you are thinking about dealing with the new health insurance mandates on your own, take a minute to consider whether it’s really worth the risk. I recommend seeking another opinion. So many people, including you and your family, depend on the general well-being of your business. You can protect this valuable asset by being sure about whether or not you comply with these costly ACA provisions.

It’s very rare to be able to fill a vacant position after interviewing a single prospect, which is why you should identify the average number you typically have to interview before you find The One. Then, work to keep your prospect sourcing funnel full. Read on to find out how.

How To Master Your Employee Recruitment Strategy

Don’t make the mistake of thinking about your employee recruitment and retention efforts as a line item on your to-do list. You should always be thinking about ways to keep your company fully staffed and operational. While there is no way to predict how many employees you will need to hire over the next year, or even the next five years, you can create a solid recruitment plan by paying close attention to your company’s historical data. Here’s how.

Know your company’s average turnover rate.

For example, say you are responsible for keeping your company of 300 employees fully staffed. Now, for the sake of simplicity, imagine that your average annual turnover rate over the last few years has held steady at 10 percent. If this year is consistent with historic trends, you should be actively looking to hire 30 people.

Of course you are going to need these 30 potential employees to have a range of different skills and levels of experience. To develop your strategy, simply take an even closer look at the data to determine, on average, how many managerial vacancies you should expect to fill versus hourly employees. Once you have narrowed down your search criteria, you can start sourcing candidates and filling your recruitment funnel.

Plan for business growth.

When we talk about recruitment, we need to take a closer look at the talent pool that currently exists within your company; meaning you should always be aware of your existing employee’s knowledge, skills, abilities and experiences and make it a point to invest in their ongoing success. This strategy is particularly important in times of growth. Consider, for example, prospects with specialized skills, advanced degrees and adequate experience can be a lot harder to find than an entry level prospect. Therefore, if a management position opens up in your company, an existing employee can readily fill the vacancy while ensuring that the transition is as seamless as possible.

Think about recruiting every day.

It’s very rare to be able to fill a vacant position after interviewing a single prospect, which is why you should identify the average number you typically have to interview before you find The One. Then, work to keep your prospect sourcing funnel full by:

Targeting prospects where they hang out. This could be done by strategically targeting your marketing to ensure you are reaching the most qualified prospects at the source. If you are looking for entry level prospects, pay more attention to social media, college job fairs and open houses. If you are looking for professionals to fill managerial positions, consider focusing on employee referrals, LinkedIn and targeted digital and traditional ad campaigns.

Are you looking for more advice to help you grow your business and improve your company culture? Check out unsuitable on Rea Radio, a unique financial services and business advisory podcast that challenges old-school business practices and the traditional business suit culture.

A common mistake some business owners make is to believe they can coordinate the office relocation themselves. And while it may be possible to manage your daily responsibilities, make decisions about the future of your business and property real estate negotiations, you may wind up doing more harm than good because you aren’t giving any of your responsibilities the proper attention needed to succeed. Read on to find out how your business advisory team can help.

There are many reasons why you may want to move your business to a new location, but if you want to be sure the location you choose is not only equipped to meet your needs, that the price is reasonable and that the location is ideal, consider bringing in your business advisory team for guidance.

When it comes to determining your business’s overall financial wellness, look no further than your financial advisor. These professionals are experts when it comes to helping you determine an accurate cash flow projection, make sense of any tax implications associated with the move and will help you determine if, based on your current size and projected growth, that space you are eyeing makes since. But your financial advisor can really only help you see a part of the picture. I recommend bringing adding a real estate expert to your business advisory team when major relocation decisions are the topic of conversation.

A common mistake some business owners make is to believe they can coordinate the office relocation themselves. And while it may be possible to manage your daily responsibilities, make decisions about the future of your business and property real estate negotiations, you may wind up doing more harm than good because you aren’t giving any of your responsibilities the proper attention needed to succeed. A real estate broker will not only manage the legwork associated with choosing your business’s new location, they will make sure you get exactly what you are paying for while negotiating a deal that builds out time for you to establish yourself at your new address.

I recently spoke with Justin Fodor, a real estate broker with Carr Healthcare Realty, a brokerage firm that works exclusively with professionals in the healthcare industry, about other reasons why a business owner – regardless of industry – should consider working with a real estate expert.

Get Your Money’s Worth

When it comes to understanding the art of negotiation, a real estate broker has the knowledge and experience needed to help you lock in a great deal at favorable terms – regardless of whether you are planning to buy or rent your new property. Oftentimes during this process, the business owner may be a apprehensive about being too forceful during the negotiation process. Justin says this is a great scenario of when a real estate broker would come in handy because they have the knowledge needed to go into the meeting with the confidence of knowing that the “sticker price” is only the starting price.

And if you are worried about sending in a broker to negotiate on your behalf, don’t be.

“Landlords work with brokers all the time,” explained Justin. “In fact, they hire their own brokers. They expect you to bring one to the table as well.”

Location, Location, Location

According to Justin, if a real estate brokerage firm doesn’t specialize in demographics itself, they will work with professionals who do to make sure their clients are getting the ideal location for their business. Whether you want to find out how many similar businesses are in a certain area or whether the local business climate is right for your business to be successful, demographic information helps optimize your office’s geography.

“We can help [our clients] decide the type of environment that’s right for them by taking into consideration foot traffic, visibility, population, and other demographics,” said Justin.

Take The Time You Need

Perhaps one of the best reasons to work with a real estate broker – especially one who specializes in your specific industry, is because they know how to negotiate for terms that matter most to you.

Justin explained that when he works with dental professionals, for example, he always asks for the time needed to move into the space, install equipment, remodel the office and reestablish their client business.

A broker, especially if they specialize in serving businesses like yours, can help you negotiate the time you need to stabilize your business’s cash flow. In fact, Justin said it’s not uncommon to secure a 5-month build-out period and 3-4 months of rent-free office space, which gives you enough time to get your business up and running again.

Are you considering an office relocation or a major warehouse move, email Rea & Associates to learn more about establishing a strong business advisory team.

Keep Your Prospective Employee Funnel Full With These Recruiting Best Practices

Maximizing your company’s recruitment and retention strategy is essential for securing business growth – not to mention sustaining that growth once you’ve achieved your goals. Here are seven quick tips to help you help you boost your existing human resources efforts and take your search for talent to the next level.

Get the team involved.

Traditionally, the best hires are those that have been referred to your company by an existing employee, which is why it’s so important to get your entire team involved in your recruitment strategy. This means that your 100 employees are the equivalent to 100 brand ambassadors – armed with experience and ready to help you spread the word about your company.

That being said, encouraging your existing employees to get involved isn’t always easy. Start thinking of ways you could show your appreciation for their recruiting efforts. One effective tactic is to implement an employee referral program that gives them a monetary reward for their efforts.

Make sure management engages.

Not only is engagement and transparency in management an important part of a strong retention strategy, if you want to encourage your team to actually get involved you need them to believe in your company and genuinely enjoy their jobs. If they are just there for a paycheck, they will be more likely to leave if another, better opportunity comes along and they will be less likely to “sell” the company to prospective employees.

Listen to the chatter.

What differentiates your company from the competition? Is there a reason why your employees would rather work for you than somewhere else? What does your reputation look like in the community and to the men and women you are targeting as potential employees? Your business is a representation of stories told by your employees, customers, vendors, neighbors, competitors and many others. You won’t always be able to control what is being said about you and your company, but you can listen and make an effort to be an active participant in the conversation. Not only does a strong listening strategy put you in a great position to address issues as they occur, it helps you identify potential concerns the public (particularly prospective) employees may have about your company. You can then make an effort to promptly fix any issues that may arise.

Get strategic.

Not only should you be strategic in your sourcing strategy, you should be anticipating your company’s future staffing issues. Pay attention to your turnover rate and identify which positions will likely need to be filled over the next 12 months. It’s also a very good idea to maintain positive relationships internally and externally. You should also formalize a plan to focus your efforts strategies that have proved to be fruitful in the past. For example, what is the best way to target managerial prospects? Which methods proved to be the most successful when recruiting long-term entry-level positions?

Are you looking for advice to help you grow your business and improve your company culture? Check out unsuitable on Rea Radio, a unique financial services and business advisory podcast that challenges old-school business practices and the traditional business suit culture.

While your financial advisor is probably the last person you are thinking about during those romantic holidays, you may want to reconsider and here’s why …

You share the same financial goals.

Whether the topic of conversation is on your personal finances or your business’s financial wellbeing, your financial advisor genuinely cares about your current and future economic security. That’s why they are always looking for ways to save you money – not just during tax season, all year long. Read “Don’t Miss Your Chance to Secure Tax-Free Wealth” to learn about five tax savings strategies you may have missed.

They are not afraid to ask for help.

Because they want your future to be financially sound, your financial advisor is not only happy to call in outside reinforcements and other industry experts to weigh in on key financial decisions, they insist on it. It’s just not realistic for one person to have all the answers, especially in business matters, which is why your financial advisor likely has a contact list full of bankers, lawyers, real estate brokers, city officials and many other industry leaders and business experts. Read “Getting by with A Little Help from Your Friends” for tips to help you identify the right advisors to help you overcome your unique challenges.

They have your back.

From helping you identify ways to protect your business against fraud to helping you avoid spending more money than is necessary during large negotiations, your financial advisor is always looking out for your best interest. Are you looking for ways to prevent occupational fraud in your business or do you need to know the true value of a property you are interested in purchasing? Either way, your financial advisor has the expertise and experience needed to keep you from being taken advantage of. Check out the article “Are Your Employees Skimming from the Top?” and “How to Make Your Building Work for You with a Cost Segregation Study” for more insight into these topics.

They always have good advice.

It should go without saying that your financial advisor has worked with their fair share of business owners. So, when it comes to knowing the ins and outs of running a business, they have a lot of good advice and can give you some great insight into techniques that have worked as well as warning you about others that may have fallen short of meeting expectations. Your financial advisor may not always provide you with the answer you were looking for, but if you bring them into the conversation they will always be there to give you the sound advice you need. Listen to episode 18 of unsuitable on Rea Radio to hear a veteran financial advisor talk about the positive psychology of having hard conversations.”

Help is always right around the corner.

If you have a personal finance question or are in need of expert business advice, email Rea & Associates to speak with one of our expert financial advisors today.

Do you know that most of your net worth is tied up in your business. That means, if you don’t adequately protect it, you could stand to lose nearly everything you’ve spent your life working for. Read on for some great tips to help you protect your business.

It’s human nature to do everything we can to protect the people we love and the property we value. From drawing up legal documents to purchasing the newest safety products on the market – we are always looking for ways to protect what’s ours. Hopefully, this same mindset governs your business’s risk-management strategy as well.

Do you know that most of your net worth is tied up in your business. That means, if you don’t adequately protect it, you could stand to lose nearly everything you’ve spent your life working for.

Columbus Business First recently published my six tips to help business owners protect their most valuable asset. I encourage you to check them out here as well.

Draw up a buy-sell agreement.Why: As the last will and testament of your business, your buy-sell agreement dictates will happen if a shareholder dies, becomes incapacitated, retires or is fired from the business.

Secure contracts for all key employees.
Why: What would you do if one of your key employees left and took your customers and other employees with them? Before your worse-case-scenario has a chance to materialize, address your concerns in the form of a contract.

Have a succession plan.
Why: Your company’s value could take a hit if you were to unexpectedly be absent from the business. Select and train your replacement sooner rather than later.

Comply with government regulations.
Why: Some violations could cost your business hundreds of thousands of dollars – or more.

Protect your intellectual property.
Why: Your ideas are valuable, especially if your ideas form the foundation of your business. When you protect your intellectual property with patents, copyrights and other legal agreements, you are protecting your business’s value.

Secure proper insurance coverage.
Why: Without the right coverage, a single lawsuit, accident or natural disaster could take your business’s value to zero.

Want to learn more about how a business valuation can help you grow and protect your business? Check out my website at www.knowandgrow.com. You can also follow me on Twitter for helpful business tips throughout the day.

Top 5 Business Blog Posts Revealed

Not a lot happens in January, unless you are a business owner who is scrambling to meet the IRS deadlines in preparation for the upcoming tax season – 2016 is no different. This is why I am glad to be able to provide you with some great tax and IRS articles from the financial experts at Rea & Associates!

If you haven’t read our top five blog posts from January, now’s your chance. You’re sure to find useful tidbit or two to use help you stay on top of your annual responsibilities while continuing to enhance your business over the next year.

IRS Gives Business Owners The Gift Of More Time – While some taxpayers may be rejoicing after learning that the IRS has delayed 1095-C reporting deadline, it’s important to remember that this late Christmas gift may not be as great as it seems – especially when it comes to meeting the deadline to file your individual tax return. Read on to learn what this deadline delay means to you.

National ID Theft Awareness Month: Get In The Know – December was National ID Theft Awareness Month and the fraud prevention team at Rea is a wealth of information when it comes to sharing great tips to help taxpayers protect their identities from fraudsters. Instead of scrolling past posts in our expansive article library or award-winning blog, we’ve compiled this Top 5 list to make your search for information easier. Read on to discover how you can prevent cyber criminals from hijacking your identity all year long.

Anything Can Happen In Cleveland – Since 1999 that phrase has been uttered so many times in reference to the Cleveland Browns it should have been declared Ohio’s state motto. Well, it’s now 2016 and it looks as though next year might finally be THE year. Why am I so optimistic? Because the day after the Browns cleaned house, the franchise announced who would step in as the new Chief Strategy Officer to help rebuild the team – Paul DePodesta! Read on to learn how this move in Cleveland could mean positive things for your business.

16 Resolutions For Business Growth In 2016 – New Year’s resolutions aren’t just great ways to set personal goals; they can help keep us on track professionally as well. This year, instead of worrying about which goal you are going to pick from the New Year’s Resolution menu, why not consider committing your energy and resources into ways that will improve the overall health of your business? Keep reading to find out how.

With tax season in full swing, this month we are busy sharing tips of getting ready for meeting with your accountant, preventing tax fraud and so much more. Don’t want to miss a post? Just subscribe to our blog and have them delivered directly to your inbox.

Last year, Ohio’s Department of Taxation rolled out the Identification Confirmation Quiz, which required many Ohioans to prove their identities before receiving a refund. Needless to say, there were more than a few unhappy campers. However, despite its shortcomings, the quiz did what it was supposed to do – helped thwart tax fraud, which is why the Ohio tax quiz will make another appearance in 2016.

So, how successful was the quiz at stopping fraudsters from stealing refunds? Very. One Ohio news source reported that the quiz helped identify an estimated 234,336 fraudulent refund requests worth $259.1 million in 2015. The year prior, only 64,693 requests were reportedly stopped.

“We are committed to combating tax fraud and ensuring that tax refunds are paid only to legitimate filers,” said Joe Testa, Ohio tax commissioner, in an op-ed piece on the Ohio Bar Association’s website on Jan. 6. “We believe we’re among the leaders in the country in aggressively combating these fraud schemes. Last year, the Identity Confirmation Quiz was instrumental in that fight.”

Testa did go on to say that, after reviewing feedback from last year’s tax season, changes were made to the types of questions asked in an attempt to improve the entire process while facilitating a better experience overall. He said that further improvements were made to the department’s tax return analysis, which should result in fewer taxpayers from being required to take the quiz in order to receive a refund.

Tax fraud and identity theft continues to be a major problem throughout the nation, but you don’t have to stand by and do nothing. This article will provide you with some tips to help reduce your risk of becoming a victim.